There are several reasons for valuing the estate of someone who has died in the United Kingdom. Find out how to value a deceased person's estate to get probate and report the estate's value to HMRC.
WHAT TO DO: Valuing a deceased person's estate is part of applying for probate. You must be able to estimate and report the value of an estate before you apply.
So, you must be able to evaluate their money, property, and their personal belongings.
In fact, you do not always need the legal right to deal with someone else's property and possessions after their death.
But, when valuing the estate of someone who's died, some of the things you will need to do include:
Note: There is a Welsh language version (Cymraeg) on valuing an estate when someone dies. You can also get further information from the Inheritance Tax and probate helpline (see below).
The amount of time it takes for valuing an estate varies. Often, it will take up to six months to finalise a valuation. Large or complicated estates can take even longer (e.g. those involving a trust or taxation issues).
In most cases, there are no 'strict' deadlines on valuing an estate after someone dies. But, there will be deadlines if the estate needs to pay Inheritance Tax. If so, you would need to:
Note: A solicitor can help with the tasks involved but they will charge you a fee. You can also get further help and information from the Inheritance Tax and probate helpline.
You may need to contact certain organisations to get extra help with the valuation of an estate. If you write to an organisation, they will help you to find more details on the deceased person's:
Note: You should include a copy of the death certificate when you write a letter. It gives you an opportunity to ask for the value of the asset or debt at the time that the person died.
Despite being a sensitive task, you might need to search through their private papers for clues of who to contact. Other people to ask include their family, friends, and their accountant or solicitor (if they had one).
Typical examples of organisations that hold assets include:
When you write to the bank your letter should also ask for information on whether:
You should find out whether the mortgage lender needs any of the payments to continue. It may be necessary while you apply for probate. If so, you may need to:
The main reason for estimating the estate's value is to determine whether you need to pay Inheritance Tax. There will be no tax liabilities for the estate if (either):
The tax threshold could be higher in some cases. It could apply if the person who died gives away their home to their children or was widowed.
If you determine there is tax to pay, it will affect the way you report the value of the estate to HMRC. It will also affect the deadlines for reporting it and the time limits for paying the taxes.
You will need to find an approximation of the 'gross' value. Adding together the assets and the gifts will give you the gross value. The purpose is to determine whether the estate owes any tax.
Note: Gifts are certain kinds of asset given away during the seven (7) years before the person died (e.g. cash).
You can start off by making a list of all the assets that they owned (e.g. items with a value). In most cases, they include:
The next step is to approximate what the value would have been on the date that the person died. You should use the realistic selling price, such as on the open market, for each asset.
Note: It is important to include all the assets in the estimation. So, do not leave out anything left to the person's spouse, their civil partner, or a charity. There will be no tax to pay on these assets.
You will need to divide the value of the asset by two (2) for joint assets. It applies to anything jointly owned with their spouse or their civil partner.
Divide the value by the number of owners for property or land shared with others. Then, deduct 10% from the share of the person who died. Take £4,000 off the value of the whole asset before you work out their share in Scotland.
You would calculate the value based on the person's share if they were a tenant in common (e.g. such as in joint property ownership).
Note: It is not uncommon to find some bank accounts in joint names 'for convenience only'. An elderly person might add someone to help them manage their account, for example. Use the actual amount the person owned rather than dividing the value by the number of joint owners.
Bank statements, and contacting family members, is a good place to start when you make a list of gifts. You need to find out about any gifts of cash, or any other assets gifted:
When estimating the value of each gift, you can use (either):
Note: Recipients may need to pay Inheritance Tax on their gifts if the person gave away more than the threshold allows when they died.
There is no need to include any debts of the estate when you estimate the gross value. But, you must inform HM Revenue and Customs about the debts when reporting the value of the estate.
You may need to check for the records of any debts after the person died. In most cases this would include:
Adding the value of the assets to any gifts will give you the gross value figure. Even though you can ignore the debts at this stage, you can now start informing HMRC about the value of the estate.
Before you start make sure you have:
You should also work out the 'net' value of an estate as part of telling HMRC. The net value amount is the assets plus the gifts - minus the debts. You must be aware of the net value when applying for a Grant of Probate.
In some cases, you will need to get accurate valuations of the estate (e.g. using a professional valuer for items over £500). But, you can continue using valuation estimates if:
Once you have estimated the total value of the estate, you can:
Note: You can get further help and information from the Inheritance Tax and probate helpline.
You must keep certain types of records after you value a deceased person's estate. You will need to keep copies of:
Note: HM Revenue and Customs can ask to see records up to twenty (20) years after paying Inheritance Tax.
Final accounts should show how you distributed money, property or personal belongings from an estate. Typical examples include documents like:
You should then send out copies of the final accounts to all the beneficiaries as part of finishing the valuation.
Valuing the Estate of Someone Who's Died in the United Kingdom